The plan, which will be submitted to Congress on Tuesday, is likely to generate debate in Washington and a lobbying battle among the telecommunication giants, which over time may face new competition for customers. Already, the broadcast television industry is resisting a proposal to give back spectrum the government wants to use for future mobile service.

The blueprint reflects the government’s view that broadband Internet is becoming the common medium of the United States, gradually displacing the telephone and broadcast television industries. It also signals a shift at the F.C.C., which under the administration of President George W. Bush gained more attention for policing indecency on the television airwaves than for promoting Internet access.

According to F.C.C. officials briefed on the plan, the commission’s recommendations will include a subsidy for Internet providers to wire rural parts of the country now without access, a controversial auction of some broadcast spectrum to free up space for wireless devices, and the development of a new universal set-top box that connects to the Internet and cable service.

Read it all.

The plan, which will be submitted to Congress on Tuesday, is likely to generate debate in Washington and a lobbying battle among the telecommunication giants, which over time may face new competition for customers. Already, the broadcast television industry is resisting a proposal to give back spectrum the government wants to use for future mobile service.

The blueprint reflects the government’s view that broadband Internet is becoming the common medium of the United States, gradually displacing the telephone and broadcast television industries. It also signals a shift at the F.C.C., which under the administration of President George W. Bush gained more attention for policing indecency on the television airwaves than for promoting Internet access.

According to F.C.C. officials briefed on the plan, the commission’s recommendations will include a subsidy for Internet providers to wire rural parts of the country now without access, a controversial auction of some broadcast spectrum to free up space for wireless devices, and the development of a new universal set-top box that connects to the Internet and cable service.

Read it all.

The Democrats have not been completely irresponsible. It’s just that as the health fight has gone on, their passion for coverage has swamped their less visceral commitment to reducing debt. The result is a bill that is fundamentally imbalanced.

This past year, we’ve seen how hard it is to even pass legislation that expands benefits. To actually reduce benefits and raise taxes, we’re going to need legislators who wake up in the morning passionate about fiscal sanity. The ones we have now are just making things worse.

Read it all.

A little-noticed law could soon result in smaller Social Security checks for hundreds of thousands of the elderly and disabled who owe the U.S. money from defaulted loans and other debts more than a decade old.

Social Security benefits are off-limits to creditors, such as credit-card companies and banks. But the U.S. can collect debts to federal agencies by “offsetting,” or withholding Social Security and disability payments.

The Treasury currently withholds benefits of 3.1 million Social Security recipients to recover defaulted student-, farm- and small-business loans, unpaid income taxes, amounts veterans owe for health care, and other debts to the government.

Read it all.

China’s central bank chief laid the groundwork for an appreciation of the renminbi at the weekend when he described the current dollar peg as temporary, striking a more emollient tone after months of tough opposition in Beijing to a shift in exchange rate policy.

Zhou Xiaochuan, governor of the People’s Bank of China, gave the strongest hint yet from a senior official that China would abandon the unofficial dollar peg, in place since mid-2008. He said it was a “special” policy to weather the financial crisis.

“This is a part of our package of policies for dealing with the global financial crisis. Sooner or later, we will exit the policies.”

Read it all.

A new congressional report released Friday says the United States’ long-term fiscal woes are even worse than predicted by President Barack Obama’s grim budget submission last month.

The nonpartisan Congressional Budget Office predicts that Obama’s budget plans would generate deficits over the upcoming decade that would total $9.8 trillion. That’s $1.2 trillion more than predicted by the administration.

The agency says its future-year predictions of tax revenues are more pessimistic than the administration’s. That’s because CBO projects slightly slower economic growth than the White House.

The deficit picture has turned alarmingly worse since the recession that started at the end of 2007, never dipping below 4 percent of the size of the economy over the next decade. Economists say that deficits of that size are unsustainable and could put upward pressure on interest rates, crowd out private investment in the economy and ultimately erode the nation’s standard of living.

Read it all.

What was she thinking? By taking a last-minute detour, on her five-day trip to Latin America, to visit President Fernández de Kirchner in Buenos Aires, Hillary Clinton has ”” recklessly ”” given the appearance of throwing America’s weight behind Argentina in its row with Britain over sovereignty of the Falkland Islands…

Intruding in the dispute was lamentable enough. But in further offering to mediate between Buenos Aires and London, the US Secretary of State is implying that there may be some fruitful area of grey between their rival black-and-white claims. By suggesting so boldly that there may be room for negotiation when Britain has insisted that there is none, Mrs Clinton gives the impression that Argentina has America’s tacit support in the dispute.

Read it all.

Barack Obama’s home state of Illinois is near the point of fiscal disintegration. “The state is in utter crisis,” said Representative Suzie Bassi. “We are next to bankruptcy. We have a $13bn hole in a $28bn budget.”

The state has been paying bills with unfunded vouchers since October. A fifth of buses have stopped. Libraries, owed $400m (£263m), are closing one day a week. Schools are owed $725m. Unable to pay teachers, they are preparing mass lay-offs. “It’s a catastrophe”, said the Schools Superintedent.

In Alexander County, the sheriff’s patrol cars have been repossessed; three-quarters of his officers are laid off; the local prison has refused to take county inmates until debts are paid.

Read it all.

The so-called “Great Recession” has left Americans depending on the government dole like never before.

Without record levels of welfare, unemployment and other government benefits as well as tax cuts last year, the income of U.S. households would have plunged by an astonishing $723 billion ”” more than four times the record $167 billion drop reported last month by the Commerce Department.

Moreover, for the first time since the Great Depression, Americans took more aid from the government than they paid in taxes.

The figures show the devastating results of the massive job losses last year and indicate that the economic recovery that began last summer is tenuous and has a long way to go before many Americans resume life as normal, analysts said.

Read it all.

As always with the Obama compromise offers, this offer seemed to be both sincere and insincere. Embodying the core contradiction of the Obama presidency, the president seemed both to want to craft a new package and also to defend the strictly Democratic approach. I think he’s a bipartisan man stuck in a partisan town, but maybe he’s an iron partisan fist in a velvet postpartisan glove.

Fourth, you got to see how confident Republicans are. Obama’s compromise offer is one the Republicans can happily refuse. In their eyes, he is saying: If you don’t make some concessions now, I’m going to punch myself in the face. If you don’t embrace parts of my bill, I will waste the next three months trying to push an unpopular measure through an ugly reconciliation process that will probably lead to failure anyway.

Fifth, you got to see at least one area of bipartisan agreement. Neither side was willing to be specific about how to cut costs and raise revenue. The Republicans continued to demagogue efforts to restrain Medicare spending. The Democrats (and the Republicans) conveniently neglected to mention the fact that they had just gutted the long-term revenue source for their entire package, the excise tax on high-cost insurance plans. That tax was diluted and postponed until 2018. There is no way that members of a Congress eight years from now are going to accede to a $1 trillion tax increase to pay for a measure that the 2010 Congress wasn’t brave enough to pay for itself.

Read it all.

Medicare payments to doctors will fall by 21 percent starting on Monday, but Congress may soon act to block the cut. It’s the latest reminder of a chronic problem for the federal government: figuring out how to pay doctors who treat Medicare patients.

The story goes all the way back to 1965, when the federal government was about to launch Medicare ”” the health-insurance plan for the elderly.

The idea of a government-run health-insurance plan made doctors nervous, and Lyndon Johnson’s administration was worried that doctors wouldn’t take Medicare patients. So Joseph Califano, Johnson’s adviser for domestic affairs, made what seemed like a small concession: Medicare would pay doctors whatever they thought was reasonable.

That worked out well for doctors. They had been providing lots of free care for old people, and they started getting paid whatever they asked for, as long as it wasn’t wildly out of line with what others were charging….

Read or listen to it all.

With uncharacteristic bluntness, Federal Reserve Chairman Ben S. Bernanke warned Congress on Wednesday that the United States could soon face a debt crisis like the one in Greece, and declared that the central bank will not help legislators by printing money to pay for the ballooning federal debt.

Recent events in Europe, where Greece and other nations with large, unsustainable deficits like the United States are having increasing trouble selling their debt to investors, show that the U.S. is vulnerable to a sudden reversal of fortunes that would force taxpayers to pay higher interest rates on the debt, Mr. Bernanke said.

“It’s not something that is 10 years away. It affects the markets currently,” he told the House Financial Services Committee. “It is possible that bond markets will become worried about the sustainability [of yearly deficits over $1 trillion], and we may find ourselves facing higher interest rates even today….”

“We’re not going to monetize the debt,” Mr. Bernanke declared flatly, stressing that Congress needs to start making plans to bring down the deficit to avoid such a dangerous dilemma for the Fed.

“It is very, very important for Congress and administration to come to some kind of program, some kind of plan that will credibly show how the United States government is going to bring itself back to a sustainable position.”

Read it all (my emphasis).

One gauge, measuring consumers’ assessment of current conditions, dropped to 19.4 from 25.2, the lowest level since 1983. The other barometer, which measures their outlook over the next six months and had been rising since October 2009, fell to 63.8 from 77.3.

The overall Consumer Confidence Index hit a historic low of 25.3 in February 2009 but then enjoyed a three-month climb to 54.8 in May, fueled by signs the economy might be stabilizing. Since then, it has been mired in a narrow range, dropping as low as 47, as rising unemployment took a toll, before climbing again for a three-month stretch.

February’s reading is well below the 61.4 figure in September 2008, when the financial crisis intensified with the collapse of Lehman Brothers. The index has had an average reading of 95.6 since the Conference Board starting tracking the figures in 1967.

Read it all.

A century ago, Herbert Croly published “The Promise of American Life,” a book — still in print — that was prophetic about today’s progressives. Contemplating with distaste America’s “unregenerate citizens,” he said that “the average American individual is morally and intellectually inadequate to a serious and consistent conception of his responsibilities.” Therefore, Croly said, national life should be a “school” taught by the government: “The exigencies of such schooling frequently demand severe coercive measures, but what schooling does not?” Unregenerate Americans would be “saved many costly perversions” if “the official schoolmasters are wise, and the pupils neither truant nor insubordinate.”

Subordination is dependency seen from above. Today, it is seen approvingly by progressives imposing, from above, their dependency agenda.

There is no school choice here; no voucher will enable Americans to escape from enveloping dependency on this “government as school.” The dependency agenda is progressive education for children of all ages, meaning all ages treated as children.

Read the whole piece.

…the basic system works; but that is no excuse for ignoring areas where it could be reformed. In the House the main outrage is gerrymandering. Tortuously shaped “safe” Republican and Democratic seats mean that the real battles are fought among party activists for their party’s nomination. This leads candidates to pander to extremes, and lessens the chances of bipartisan co-operation. An independent commission, already in existence in some states, would take out much of the sting. In the Senate the filibuster is used too often, in part because it is too easy. Senators who want to talk out a bill ought to be obliged to do just that, not rely on a simple procedural vote: voters could then see exactly who was obstructing what.

These defects and others should be corrected. But even if they are not, they do not add up to a system that is as broken as people now claim. American democracy has its peaks and troughs; attempts to reform it dramatically, such as California’s initiative craze, have a mixed history, to put it mildly. Rather than regretting how the Republicans in Congress have behaved, Mr Obama should look harder at his own use of his presidential power.

Read it all.

How polarized is America today? Not all that polarized by historical standards. In 1856, a South Carolina Congressman beat a Massachusetts Senator half to death with his cane in the Senate chamber ”” and received dozens of new canes from appreciative fans. In 1905, Idaho miners bombed the house of a former governor who had tried to break their union. In 1965, an anti”“Vietnam War activist stationed himself outside the office of the Secretary of Defense and, holding his year-old daughter in his arms, set himself on fire. (She lived; he did not.) By that measure, a Rush Limbaugh rant isn’t particularly divisive. Americans may yell at one another about politics, but we mostly leave our guns and bombs at home, which is an improvement….

What really defines our political era, as Ronald Brownstein notes in his book The Second Civil War, is not the polarization of Americans but the polarization of American government. In the country at large, the disputes are real but manageable. But in Washington, crossing party lines to resolve them has become excruciatingly rare.

The result, unsurprisingly, is that Americans don’t like Washington very much. According to a CNN poll conducted in mid-February, 62% of Americans say most members of Congress do not deserve re-election, up 10 points from 2006. Public skepticism about the Federal Government and its ability to solve problems is nothing new, but the discontent is greater today than it has been in at least a decade and a half. Witness the growth of the Tea Party movement, a diffuse conglomeration of forces that have coalesced around nothing so much as a shared hostility toward Washington. Or the Feb. 15 announcement by Indiana Senator Evan Bayh ”” a man who almost made it onto three presidential tickets ”” that he would not stand for re-election because “Congress is not operating as it should” and “even in a time of enormous challenge, the people’s business is not getting done.”

Read it all.

So all is coming right. Sales of existing homes in the final quarter of last year were 27.2% above the 2008 level. Home construction jumped 2.8% in January, to its highest level in six months. The mining, manufacturing and utilities sectors also grew at satisfactory rates as did retail sales.

So confident is the Federal Reserve in the recovery that it has raised a key interest rate.

Alas, every silver lining has a cloud ”” in the case of the American economy, several. For one thing, the fiscal deficit, which is fuelling some of the growth, is clearly unsustainable. Even under the rosy scenario posited by the president ”” economic growth at about twice the rate the non-partisan Congressional Budget Office is predicting ”” the deficit will still be unsustainably high, and rising, in 2020.

Congress knows this, the president knows this, and the opposition knows this. But the Democrats want to fill the gap by raising taxes, anathema to Republicans, who fear such a move would stifle growth by reducing entrepreneurs’ incentive to create new businesses and jobs. The Republicans want to cut spending, a move the Democrats say would stifle growth by prematurely withdrawing a prop from a fragile recovery.

Read it all.

The Table is of the worst deficits as a percentage of GDP in the world, according to OECD figures.

Guess where the United States is before you look.

The Fed stressed on Thursday that the ”modifications are not expected to lead to tighter financial conditions for households and businesses and do not signal any change in the outlook for the economy or for monetary policy”.

“The increase in the spread and reduction in maximum maturity will encourage depository institutions to rely on private funding markets for short-term credit and to use the Federal Reserve’s primary credit facility only as a back-up source of funds,” the Fed said.

But economists and strategists differed on how to read the move, which had been anticipated after comments from Fed board members and this week’s minutes from the monetary policy meeting which indicated it was close.

Aaron Kohli, strategist at RBS Securities, said: ”This is more a case of normalisation, rather than a precursor to a change in monetary policy.”

Others considered the discount rate hike as part of the broader “exit strategy” from exceptional measures, which are likely to precede an eventual tightening in monetary policy after months of near-zero interest rates.

Read it all.

After decades of warnings that budgetary profligacy, escalating health care costs and an aging population would lead to a day of fiscal reckoning, economists and the nation’s foreign creditors say that moment is approaching faster than expected, hastened by a deep recession that cost trillions of dollars in lost tax revenues and higher spending for safety-net programs.

Yet rarely has the political system seemed more polarized and less able to solve big problems that involve trust, tough choices and little short-term gain. The main urgency for both parties seems to be about pinning blame on the other, before November’s elections, for deficits now averaging $1 trillion a year, the largest since World War II relative to the size of the economy.

Mr. Bayh, the centrist Democrat from Indiana, lodged his complaint about excessive partisanship and Congressional gridlock on Monday by way of explaining his decision not to seek re-election. But he is hardly alone in sounding an alarm about the long-term budgetary outlook, which has Medicare, Medicaid and Social Security costs growing at unsustainable rates and an inefficient tax system that cannot keep up.

“I used to think it would take a global financial crisis to get both parties to the table, but we just had one,” said G. William Hoagland, who was a fiscal policy adviser to Senate Republican leaders and a witness to past bipartisan budget summits. “These days I wonder if this country is even governable.”

Read it all.

What we in the western world are about to learn is that there is no such thing as a Keynesian free lunch. Deficits did not “save” us half so much as monetary policy ”“ zero interest rates plus quantitative easing ”“ did. First, the impact of government spending (the hallowed “multiplier”) has been much less than the proponents of stimulus hoped. Second, there is a good deal of “leakage” from open economies in a globalised world. Last, crucially, explosions of public debt incur bills that fall due much sooner than we expect

For the world’s biggest economy, the US, the day of reckoning still seems reassuringly remote. The worse things get in the eurozone, the more the US dollar rallies as nervous investors park their cash in the “safe haven” of American government debt. This effect may persist for some months, just as the dollar and Treasuries rallied in the depths of the banking panic in late 2008.

Yet even a casual look at the fiscal position of the federal government (not to mention the states) makes a nonsense of the phrase “safe haven”. US government debt is a safe haven the way Pearl Harbor was a safe haven in 1941.

Even according to the White House’s new budget projections, the gross federal debt will exceed 100 per cent of GDP in just two years’ time. This year, like last year, the federal deficit will be around 10 per cent of GDP. The long-run projections of the Congressional Budget Office suggest that the US will never again run a balanced budget. That’s right, never.

Read it all.

This touches on the still-essential question that historians will write books about: How did the president lose the room? How did he lose popularity?

The leftward edge of the left says he did it by being too accommodating, by trying for a bipartisanship that doesn’t exist. The rightward edge of the right says he did it by revealing his essentially socialistic agenda. The center has said, in polls and at the polls, that it didn’t like his administration’s first-year obsession with a health-care bill that was huge, costly and impenetrably complicated, and would be run by those people who gave you the DMV and the post office.

The political class this week blamed it on the Chicago Mafia, the longtime Obama friends and associates who surround him in the Oval Office. But even that doesn’t explain it. What did they do wrong? And why do people think Mr. Obama’s advisers are different from Mr. Obama?

Washington’s pundits have begun announcing that the White House is better at campaigning than at governing, but that was obvious last summer. The president and his advisers understand one thing really well, and that is Democratic primaries and Democratic politics. This is the area in which they made their careers. It’s how they defeated Hillary Clinton””by knowing how Democrats think. In the 2008 general election, appealing for the first time to all of America and not only to Democrats, they had one great gift on their side, the man who both made Mr. Obama and did in John McCain, and that was George W. Bush.

But now it is 2010, and Mr. Bush is gone. Mr. Obama is left with America, and he does not, really, understand it. That is why he thinks moving to the center would be political death, when moving to the center and triangulating, as Bill Clinton did, might give him a new lease on life.

Read it all from yesterday’s Wall Street Journal.

Last year it was banks; this year it is countries. The economic crisis, which seemed to have eased off in the latter part of 2009, is once again in full swing as the threat of sovereign default looms.

Europe’s leaders are struggling to avert the biggest financial disaster in the euro’s 11-year history…. This week all eyes have been on Greece. If it defaults, it will be the first EU member to do so. As The Economist went to press EU leaders were meeting to discuss what to do, and there was talk of a German-led rescue scheme. If it happens, other European candidates may be queueing up. Bond markets are worried about the capacity of Spain (see article), Ireland and Portugal to repay their debts, forcing these countries to increase taxes and cut spending, even as they remain mired in recession.

Europe’s troubles have given investors good reason to worry; but they are not the only cause for concern.

Read it all.

So though the remarkable decline in the annual Social Security surplus from 2008 to 2009 qualifies as surprising news, the inevitable bottom-line debacles awaiting it and Medicare do not. Anyone capable of doing simple arithmetic — and willing to face the hard truths of a protracted, persisting drop in the workers-to-beneficiaries ratio — could long ago see that those massive federal entitlement programs were unsustainable without comprehensive transformations.

Those needed makeovers grow more costly with every passing year of inaction. Something’s got to give, likely on both sides of the funds collected/funds dispersed equation, or the system will go bankrupt.

That dire outcome will occur even if Washington stops robbing the Social Security trust fund. Nor has that regular raiding kept the regular federal budget deficit from rising to record levels, and the White House budget plan predicts another $1.6 trillion in red ink.

Read it all.

Senior Chinese military officers have proposed that their country boost defense spending, adjust PLA deployments, and possibly sell some U.S. bonds to punish Washington for its latest round of arms sales to Taiwan.

The calls for broad retaliation over the planned U.S. weapons sales to the disputed island came from officers at China’s National Defence University and Academy of Military Sciences, interviewed by Outlook Weekly, a Chinese-language magazine published by the official Xinhua news agency.

The interviews with Major Generals Zhu Chenghu and Luo Yuan and Senior Colonel Ke Chunqiao appeared in the issue published on Monday.

Read it all.

“I am really worried about the United States … more worried than I’ve ever been in my career,” McDonald, chairman and chief executive of the world’s largest household products maker, told Reuters in an interview at his company’s Cincinnati headquarters. “I worry about the deficit, I worry about an uncertain future.”

McDonald, a member of the U.S. Advisory Committee for Trade Policy and Negotiations who visited Washington, D.C. last weekend, said he has told government officials that they must “create greater certainty for business.”

Read it all.

Social Security’s annual surplus nearly evaporated in 2009 for the first time in 25 years as the recession led hundreds of thousands of workers to retire or claim disability.

The impact of the recession is likely to hit the giant retirement system even harder this year and next. The Congressional Budget Office had projected it would operate in the red in 2010 and 2011, but a deeper economic slump could make those losses larger than anticipated.

“Things are a little bit worse than had been expected,” says Stephen Goss, chief actuary for the Social Security Administration. “Clearly, we’re going to be negative for a year or two.”

Read it all

Mr Obama’s budget reduces the projected deficits between now and 2020 by just over $2 trillion, mainly through reductions in planned spending on overseas military operations and proposed tax changes. The concern is that many of the recommended tax changes may not stick. Mr Obama’s Financial Crisis Responsibility Fee (the so-called bank tax) will probably survive, but other items, including reform of the international tax system and repeal of fossil-fuel subsidies, were proposed last year and failed to make it through Congress. Measures boosting taxes on upper-income households (those earning above $250,000 a year) should fare better, but the decision to sustain George Bush’s tax cuts for everyone else is short-sighted.

If Congress balks, as expected, at some tax provisions, then deficits will prove larger than budgeted for. But even the president’s proposals fail to cut deficits to the 3% target. To make up the difference, Mr Obama will create a deficit commission by executive order, charged with making recommendations for long-run budget sustainability. Yet Congress had earlier failed to pass its own proposal to create a bipartisan deficit commission, which would at least have been able to force a yes-or-no vote on its recommendations. Republicans who had praised the idea cynically reversed themselves when the president signalled his support. And even before its defeat, the Senate voted 97-0 to shield Social Security from the commission’s purview.

The aversion of Congress to hard decisions is no small obstacle for the president. But Mr Obama has done himself no favours by fudging the hard budget choices which must ultimately be made. It could be a costly failure. The American government has room to continue supporting the weak economy, but only for as long as markets believe that the United States will eventually make good on its obligations. In this budget proposal, Mr Obama has not done anything to reassure them.

Read it all.

The US economy is in a mess ”“ even if growth has resumed, and bankers are once again receiving huge bonuses. More than one out of six Americans who would like a full-time job cannot get one; and 40% of the unemployed have been out of a job for more than six months.

As Europe learned long ago, hardship increases with the length of unemployment, as job skills and prospects deteriorate and savings gets wiped out. The 2.5-3.5 million foreclosures expected this year will exceed those of 2009, and the year began with what is expected to be the first of many large commercial real-estate bankruptcies. Even the Congressional Budget Office is predicting that it will be the middle of the decade before unemployment returns to more normal levels, as America experiences its own version of “Japanese malaise….”

Three things can make a difference: a second stimulus, stemming the tide of housing foreclosures by addressing the roughly 25% of mortgages that are worth more than the value the house, and reshaping our financial system to rein in the banks.

Read it all.

Don’t get confused by the size of the numbers at stake. Pay attention to the ratio of cumulative debt to the size of the national economy. That will tell you how easily we can manage the debt.

The debt-to-GDP ratio right now is close to 53%””still in the manageable zone. But after the boomers hit retirement, it will soar. One of the most telling figures in the president’s budget document is the Congressional Budget Office’s projection that by 2020 the debt-to-GDP ratio will be 77%, assuming no entitlement reforms. That’s bad news. The ratio is moving in the wrong direction. At some point, the dollar could tank and interest rates explode.

—Robert Reich in today’s Wall Street Journal